Loan to Srilanka

Loan to Srilanka

(GS PAPER -2, India and its neighborhood

Source- The Hindu)


  • India has signed an agreement extending a USD 100 million Line of Credit (LOC) to its neighbor Sri Lanka for projects related to the Solar Energy Sector.
  • This LOC is for a period of 20 years, with an interest of 1.75%.
  • This agreement was signed between the Government of Sri Lanka and the Export-Import (EXIM) Bank of India.
  • EXIM Bank is a specialized financial institution and is solely owned by the Government of India.

What is Line of Credit-

  • It is a credit facility extended by any bank or any other financial institution to a government, business, or individual customer, that can enable the customer to draw the maximum loan amount.
  • The borrower can access funds from the line of credit at any point of  time as long as they do not exceed the maximum amount (or credit limit) set in the signed agreement and meet any other requirements such as making timely minimum payments etc 

Significance of the Line of Credit-

  • It will help Srilanka to finance various projects in the solar energy sector such as rooftop solar photovoltaic systems for households and government buildings.
  • Some of these projects were already announced during the Founding Conference of the International Solar Alliance (ISA).

International Solar Alliance-

  • This initiative was launched by the Indian Prime Minister and the President of France in 2015 on the sidelines of the United Nations Climate Change Conference of Parties (CoP 21) with 121 solar resource-rich countries lying fully or partially between the tropic of Cancer and tropic of Capricorn as prospective members.
  • 89 countries have signed the ISA framework agreement up to 2021.
  • Its’ vision is to enable One World, One Sun, One Grid (OSOWOG).

-Khyati Khare

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